*1565 1. At the time of his death decedent owned securities on deposit in banks in France and England. After decedent's death one of the executors went to those countries to obtain possession of said securities. The banks refused to turn the securities over to the executor until certain death taxes claimed by the French Government, and inland revenue dues claimed by the British Government, were first paid. The executors paid the said taxes out of moneys forming part of the estate in the United States and the securities thereby were brought into the administration of the estate in this country. Respondent included in the gross estate the value of the securities without deduction of the foreign taxes. Action of the respondent reversed on authority of Frick v. Pennsylvania,268 U.S. 473">268 U.S. 473.
2. A confession of error by the respondent, or stipulation of the parties, which constitutes substantially an erroneous conclusion of law in direct contravention of a statute, will not be given effect in redetermining the deficiency.
3. On the evidence, held, that certain gifts made within two years of decedent's death were in fact not made in contemplation of death, and*1566 are not includable in the gross estate subject to tax. Estate of Robert Todd Lincoln,24 B.T.A. 334">24 B.T.A. 334 followed.
*984 This is a proceeding for the redetermination of a deficiency in estate tax in the amount of $47,953.29. All issues raised in the pleadings were settled at the hearing by agreement of the parties except two, which involve the action of the respondent in disallowing as deductions from the value of certain securities deposited in France and England the amounts paid by the executors for death taxes in France and inland revenue dues in England.
FINDINGS OF FACT.
The petitioners are executors of the last will and testament of Eugene Littauer, deceased, and have their principal offices at 235 died in New York City on February 13, 1929. His legal residence died in New York City on February 13, 1929. His letal residence was in the city of Gloversville, N.Y.
At the time of his death the decedent was the owner of certain securities which were deposited in banks in France, England, and other countries, and one of*1567 the executors, Lucius N. Littauer, after his appointment as such, personally went to those countries to obtain possession of said securities. The French Government claimed death taxes in the amount of $10,986.56 upon the securities on deposit in France, which amount was paid to the French Government by the executors, and the British Government claimed inland revenue dues in the amount of $18,789.72 upon the securities deposited in England, which amount was paid to the British Government by the executors.
The amounts so paid by the executors were paid out of moneys forming a part of the estate in the United States, and thereby the said securities were brought into the administration of the estate in the United States.
The banks in which said securities were deposited in France and England refused to deliver possession of the said securities to the executor until the French death taxes and the British inland revenue dues, respectively, were paid. Upon payment of said amounts the securities were turned over to the said executor.
The petitioners included the French securities in the decedent's gross estate for purposes of the Federal estate tax at the valuation of $20,271 and*1568 the British securities at the valuation of $150,242.48. The respondent in computing the deficiency included said securities at valuations of $31,257.56 and $169,032.20, respectively. Respondent's increase of the valuations of said securities over the amounts included by the petitioners in the estate-tax return resulted from the disallowance of the death taxes and inland revenue dues required to be paid thereon by the French and British Governments.
*985 At the time of his death the decedent owned 1,550 no-par-value shares of stock in the Fonda Glove Lining Company, which were included by the petitioners in the estate-tax return at a valuation of $50 per share. In computing the deficiency, the respondent included said stock at a valuation of $60 per share. The fair value of this stock at the date of decedent's death was $50 per share.
During his lifetime the decedent made the following gifts of money to his brother, William Littauer:
| 1927: | |
| March 28 | $5,000 |
| April 1 | 3,750 |
| July 1 | 3,750 |
| July 5 | 5,000 |
| October 1 | 3,750 |
| September 26 | 2,500 |
| 1928: | |
| January 3 | 5,250 |
| February 15 | 7,500 |
| March 1 | 5,000 |
| April 2 | $6,000 |
| July 2 | 6,000 |
| October 1 | 6,000 |
| October 1 | 5,000 |
| October 12 | 39,050 |
| 1929: | |
| January 15 | 6,000 |
| Total | 109,550 |
*1569 During his lifetime the decedent made the following gifts of money to his niece, Catherine Louise Doeller:
| 1927: | |
| October 17 | $1,000.00 |
| November 3 | 2,544.15 |
| December 22 | 500.00 |
| 1928: | |
| April 18 | $1,800.00 |
| May 1 | 950.00 |
| July 2 | 2,750.00 |
| Total | 9,544.15 |
In determining the deficiency, respondent included in the gross estate the total gifts made by the decedent to his brother, above set out, less $5,000, or the net amount of $104,550, and likewise included gifts to decedent's niece in the net amount of $4,544.15.
One Dr. Elias Berg administered the anaesthetic to decedent at the surgical operation performed shortly before his death. For the services so rendered a claim was presented against the estate in the amount of $500, which was finally compromised and paid by the executors on October 23, 1930, in the amount of $250.
On February 4, 1931, the petitioners, as executors of the decedent's estate, paid to the collector of internal revenue for the fourteenth district of New York the net amount of $18,650.66 on account of additional income tax of the decedent for the year 1927, the total additional tax being reduced by an overpayment for 1926 and including*1570 interest adjusted to November 5, 1930; and on the same date paid to the same collector of internal revenue the amount of $15,062.97 on account of additional income tax of the decedent for the year 1928, including interest to November 5, 1930.
*986 OPINION.
TRAMMELL: In the pleadings the petitioners set forth nine assignments of error, upon the basis of which it is asserted that the respondent determined the deficiency in controversy. These alleged errors will be considered in the order stated in the petition.
1. The petitioners allege that the respondent erred in including in the gross estate 1,550 shares of stock in the Fonda Glove Lining Company at $60 per share instead of $50 per share, as returned by the executors. At the hearing respondent conceded the contention of the petitioners on this issue, and we have accordingly found that the fair value of this stock at the date of decedent's death was $50 per share.
2 and 3. Under these assignments the petitioners allege that the respondent erred in including in the gross estate certain "French securities" at a valuation of $31,257.56 instead of $20,271, as returned by the executors, and in including in the gross*1571 estate certain "British securities" at $169,032.20 instead of $150,242.48, as returned by the executors.
The evidence establishes that, at the time of his death, decedent owned certain securities which were deposited in banks in France and England. After decedent's death one of the executors personally went to those countries to obtain possession of said securities, but the French banks refused to deliver the securities there to the executor until death taxes claimed by the French Government in the amount of $10,986.56 had first been paid. Likewise the English banks refused to turn over to the executor the securities in their possession until inland revenue dues claimed by the British Government in the amount of $18,789.72 had first been paid. The executors paid, out of moneys forming part of the estate in the United States, the taxes claimed by the two foreign governments, respectively, and the securities were thereby brought into the administration of the decedent's estate in the United States.
The securities were returned by the executors as a part of the gross estate at their value less the amount of taxes so paid to the French and British Governments. In determining*1572 the deficiency the respondent included the securities without deducting said taxes. The petitioners contend, first, that the securities should be included at their value less the taxes paid in order to obtain possession and bring them into the administration of the estate in the United States, and, secondly, in the alternative, that deduction of the taxes should be allowed as administration expenses if the securities are included in the gross estate at their full value.
We think these issues are controlled by the principles applied by the Supreme Court to strikingly similar facts in the case of . We quote from the court's opinion as follows:
The decedent owned many stocks in corporations of states, other than Pennsylvania, which subjected their transfer on death to a tax and prescribed means of enforcement which practically gave these states the status of lienors in possession. As those states had created the corporations issuing the stocks, they had power to impose the tax and to enforce it by such means, irrespective of the decedent's domicile, and the actual situs of the stock certificates. Pennsylvania's*1573 jurisdiction over the stocks necessarily was subordinate to that power. Therefore to bring them into the administration in that state it was essential that the tax be paid. The executors paid it out of moneys forming part of the estate in Pennsylvania and the stocks were thereby brought into the administration there. We think it plain that such value as the stocks had in excess of the tax is all that could be regarded as within the range of Pennsylvania's taxing power. * * * So much of the value as was required to release the superior claim of the other states was quite beyond Pennsylvania's control. Thus the inclusion of the full value in the computation on which that state based its tax, without any deduction for the tax paid to the other states, was nothing short of applying that state's taxing power to what was not within its range. That the stocks, with their full value, were ultimately brought into the administration in that state, does not help. They were brought in through the payment of the tax in the other states out of moneys of the estate in Pennsylvania. The moneys paid out just balance the excess in stock value brought in. Yet in computing the tax in that state*1574 both were included.
We are of opinion that in so far as the statute requires that stocks of other states be included at their full value, without deducting the tax paid to those states, it exceeds the power of the state and thereby infringes the constitutional guaranty of due process of law.
In the same opinion from which the foregoing extract is quoted, the court calls attention to the fact that the Federal estate tax is imposed as an excise on the transfer of property from a decedent and takes effect at the instant of transfer.
The statute applicable here is the Revenue Act of 1926, which provides:
SEC. 302. The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated -
(a) To the extent of the interest therein of the decedent at the time of his death.
Assuming, without here deciding, that the British inland revenue dues and the French death taxes took effect at the instant of decedent's death, and bearing in mind that the Federal estate tax here involved is an excise imposed upon the transfer of decedent's property by death, we think*1575 it is clear that the "interest of decedent at the time of his death" in the British and French securities, which was transferred as a result of his death, was the value thereof less the British and French taxes. In any event, certainly such diminished value is all *988 that was transferred and brought into the administration of his estate, and such interest is all that is subjected by the statute to tax. The respondent's action is, therefore, reversed.
Having reached the conclusion indicated, it is unnecesary to consider the petitioner's alternative plea that the amounts of the British and French taxes should be deducted as administration expenses.
4 and 5. These issues involve gifts of money made by the decedent to his brother, William Littauer, and to his niece, Catherine Louise Doeller, within two years of the date of his death. The gifts made by the decedent to his brother within such period aggregated $109,550, of which the respondent included in the gross estate $104,550, or the excess over $5,000. The gifts made by the decedent to his niece within said two-year period amounted to $9,544.15, of which the respondent included in the gross estate the excess*1576 over $5,000, or the net amount of $4,544.15.
At the hearing the petitioners offered evidence, without objection from the respondent, to establish that these gifts were in fact not made in contemplation of death, and admittedly being completed gifts at the time made, they could not have been intended by the decedent to take effect in possession or enjoyment at or after his death. Obviously, then, the respondent included said gifts in the gross estate in excess of $5,000, pursuant to section 302(c) of the Revenue Act of 1926, which provides that:
Where within two years prior to his death but after the enactment of this Act and without such a consideration the decedent has made a transfer or transfers, by trust or otherwise, of any of his property, or an interest therein, not admitted or shown to have been made in contemplation of or intended to take effect in possession or enjoyment at or after his death, and the value or aggregate value, at the time of such death, of the property or interest so transferred . such transfer or transfers shall be deemed and held to have been made in contemplation of death within the meaning of this title.
*1577 Upon completion of the testimony offered by the petitioners at the hearing, the respondent conceded that said gifts were in fact not made in contemplation of death, and that the amounts thereof included in the gross estate should be excluded in the redetermination of the deficiency. This constituted in effect a confession of error on the part of the respondent, and also an agreement or stipulation of the parties that the gifts should not be included in the gross estate. The statute, however, provides that gifts of the kind here involved "shall be deemed and held to have been made in contemplation of death," and so subject to tax. A conclusive presumption is raised by the statute which does not admit of rebuttal. The action of the respondent in confessing error, or if viewed as a stipulation of the parties, amounts substantially to a conclusion of law in direct contravention *989 of the statute. In these circumstances, we can not give effect to such a confession or stipulation.
On the other hand, the same net result must be reached, but for an entirely different reason. The validity of the statute above quoted was considered by us in *1578 , and we there held that the conclusive presumption provision of section 302(c) of the Revenue Act of 1926 is unconstitutional. On authority of that decision, we hold here that, since the respondent included the gifts in question in decedent's gross estate because of such invalid statutory presumption, and it having been shown that the gifts in fact were not made in contemplation of death, the amounts included by the respondent will be excluded in redetermining the deficiency.
6. This assignment of error relates to the action of the respondent in disallowing a claim of Dr. Berg against the estate in the amount of $15,000 for surgical services rendered to the decedent. No evidence was offered thereon at the hearing, and for the purposes of this proceeding the issue may be considered as abandoned in view of the following statement of counsel for the petitioners:
Now, your Honor, I think I made a misstatement when you asked me whether any of the items in the petition would not be pressed; the item of the bill of Dr. Berg will not be pressed at this time, that being in dispute, pending in the Surrogate's court, as to the*1579 amount.
7. This item relates to the claim of Dr. Elias Berg in the amount $500of, which, the evidence shows, was compromised and settled by the executors on October 23, 1930, for $250. The latter amount constitutes an allowable deduction from the value of the gross estate.
8 and 9. These issues involve additional income taxes of the decedent for the years 1927 and 1928, the amounts of which were originally in controversy. The matter was adjusted and on February 4, 1931, the executors paid the amounts set out in our findings of fact, which amounts will be allowed as deductions in redetermining the deficiency.
Judgment will be entered under Rule 50.